Home BUSINESS After disappointing investors, Lordstown Motor Company regretted the failure of trust.

After disappointing investors, Lordstown Motor Company regretted the failure of trust.

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The mayor of Lordstown, Ohio, is waiting to see what happens next to this high-profile electric truck startup, which promises to revitalize the village. The same is true for company investors.

Lordstown Motors has pledged to provide 400 jobs for Mahoning Valley and has the opportunity to transform this area of ​​northeastern Ohio into what some people call the “voltage valley”.

On the contrary, senior management has resignation After warning that the company may run out of funds, Lordstown now has the potential to become one of the biggest disappointments among electric car startups that have rushed to go public through special-purpose acquisitions in the past year.

Mahoninggu knew disappointment.This village of 3,200 people is about 17 miles from Youngstown, where residents are still talking “Black Monday”On that day in September 1977, Youngstown Plates and Tubes announced the closure of the larger of its two steel mills, resulting in 5,000 job losses.

President Donald Trump held a 2017 rally in Youngstown, telling Ohioans not to move because “we will get these jobs back and we will fill these factories.”

Lordstown Motors said it will produce its flagship pickup truck Endurance’s plant, which was previously manufactured by General Motors for the Chevrolet Cruze and employs 12,000 people at its height.GM shut it down in 2019 and agreed to sell it to startups under Trump’s nagging despite its uncertainty Financing plan.

“We are the survivors of the Mahoning Valley,” Lordstown Mayor Anor Hill said. “We are a place of dishonesty.”

Lordstown’s electric pickup Endurance will target commercial fleet operators © Megan Jelinger/AFP via Getty

Bold sales forecast

Lordstown Motors is not the first electric car startup to disappoint investors within a few months of being listed by Spac. Nicholas, Plans to manufacture industrial trucks, admitting that its founders made Full or partial inaccurate statement, The company is currently under investigation by the US Department of Justice. As investors are excited about the difficult realism of achieving ambitious production and sales targets, the stock prices of other start-ups have fallen.

Compared with companies pursuing traditional IPOs, companies listed through SPAC are more free to make bold sales forecasts. Regulators have marked this difference as worry.

Lordstown prevailed. The PowerPoint presentations used to attract investors in August and September portrayed the bright prospects of the company’s prospects. The company stated that it expects to achieve US$1.7 billion in revenue by 2022, which will be more than three times that revenue by 2024, mainly from Endurance, which is priced at US$52,500. The target customer is commercial fleet operators rather than luxury goods Home.

It is worth noting that this startup touts its “strong” balance sheet. After listing, it will have $675 million in cash, including funds raised from institutional investors and cash already held by DiamondPeak Acquisition, which was set up by former Goldman Sachs real estate banker David Hamamoto (David Hamamoto). It stated that it does not expect “to have additional capital requirements” before it starts selling cars.

Behind the scenes, it is arguing with regulators how to star an optimistic outlook.

In September, the US Securities and Exchange Commission ordered it to mention more prominently that an independent auditor found “significant doubts about the company’s ability to continue operations” when assessing its losses to date.

The report is located on page 288 of Lordstown’s preliminary proxy statement and was cited on page 51 of the final version before DiamondPeak shareholders voted.

“Although Lordstown believes that the proceeds from the business combination [with DiamondPeak] Sufficient funds will be provided to alleviate this doubt, and additional funds may be needed in the future for various reasons,” the company said in the final power of attorney.

September 17, 2020: Lordstown introduces investors

September 21, 2020: Lordstown and the US Securities and Exchange Commission exchange

‘Assess funding options’

It turns out that the agency’s detailed rules are more reliable than some figures in Lordstown PowerPoints.

The prospect of disappointment was first raised in March, when the short seller Hindenburg studied Published a report Said that the company’s 100,000 pre-orders were “mainly fictitious and used as props to raise funds.” The SEC launched an investigation.

In May, the company hinted at plans to raise more funds, and by last week, Lordstown warned the company May fail Within a year.

According to the June 8 regulatory document, it had $587 million in cash and cash equivalents at the end of the first quarter “not enough to finance commercial scale production.” “The management is currently evaluating various financing options.”

Show Ride with Lordstown Motors stock price ($) line chart

The company did not respond to requests for comment on this article, but has issued a series of public comments this week.

On Monday, when CEO Steve Burns and his CFO resigned, a special committee set up by Lordstown’s board revealed that the company’s description of electric pickup truck reservations was inaccurate. It said a large number of “influencers” who had no intention of buying trucks or entities without the funds to complete the purchase.

On Tuesday, executives told reporters that the company has enough cash to maintain until May 2022, and still plans to start limited production of Endurance in September. The company’s president, Rich Schmidt, stated that Lordstown had “binding” purchase orders for the first two years of production.

On Thursday, the company clarified in a U.S. Securities and Exchange Commission document that although these pre-orders “provide us with an important indicator of demand,” they are not solid.

“The high tide does not raise all the boats”

Mayor Arno Hill said the village has excluded Lordstown Motors from its budget plan. “You don’t put your finances on things you don’t have yet,” he said.

His hopes for the future of Mahoning Valley Power are more firmly pinned on established companies such as General Motors and LG Chem. The latter announced the establishment of a joint venture in May 2020 to establish a US$2.3 billion company in Lordstown. Factory to produce batteries. Hill said the factory was built “at a very fast pace” and has already started hiring. It is expected to hire 1,100 employees.

Lordstown Mayor Arnold Hill: “We are a place of dishonesty” © AFP via Getty Images

Hill said that the jobs lost by GM’s closure of the Cruze plant cannot be immediately replaced, “but we are working hard.”

Lordstown’s predicament may also stop investors looking for the next Tesla, who have invested heavily in electric car start-ups in the past year.

“This is the fourth industrial revolution being staged, but the rising tide has not lifted all the ships,” said Wedbush analyst Dan Ives. For Lordstown Motors, “there are more questions than answers at this time”.

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